Options
Series 7 options formulas
Review Series 7 options formulas for calls, puts, covered calls, protective puts, spreads, and straddles, then drill payoff math with mapped questions.
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Series 7 options formulas
Review Series 7 options formulas for calls, puts, covered calls, protective puts, spreads, and straddles, then drill payoff math with mapped questions.
- Start with the free diagnostic to find weak topics.
- Use the related study pages below to repair the missed rule.
- Then prove the rule in mapped practice questions and a timed exam simulation.
Study sequence
Use the page, then prove it in reps.
Read the strategy, run a short diagnostic, repair the missed rule, then move into mapped practice.
On this page
Why options math decides Series 7 scores
Options is the highest-friction, highest-yield block on the 2026 FINRA Series 7. Questions ask for exact dollar figures — maximum gain, maximum loss, breakeven — inside short customer scenarios, and the math has to be automatic by exam day. The 2026 FINRA Series 7 exam delivers 125 scored multiple-choice items plus 5 unscored pretest items — 130 items total — in 3 hours and 45 minutes. The passing score is 72. The SIE is a corequisite, so most candidates take SIE first or alongside. PassSeries7 is an independent study product and is not affiliated with FINRA. FINRA does not publish a topic-level question count for options, and no study product should claim one. The pattern is simpler: candidates who own the formulas below clear the chapter, and candidates who don't burn time they can't spare in the last hour.
Single-option positions
Start here. Every strategy later is a combination of these four, and getting them wrong rules out every spread and hedge built on top.
Long call
Max gain: unlimited as the stock rises. Max loss: the premium paid. Breakeven: strike + premium.
Long put
Max gain: strike − premium (stock to zero). Max loss: the premium paid. Breakeven: strike − premium.
Short (naked) call
Max gain: the premium received. Max loss: unlimited as the stock rises. Breakeven: strike + premium.
Short (naked) put
Max gain: the premium received. Max loss: strike − premium (stock to zero). Breakeven: strike − premium.
Stock + option hedges
The two stock/option combinations the exam tests most.
Covered call (long stock + short call)
Max gain: (strike − stock cost) + premium, capped at the call strike. Max loss: stock cost − premium, if the stock goes to zero. Breakeven: stock cost − premium.
Protective put (long stock + long put)
Max gain: unlimited upside, reduced by the premium paid. Max loss: (stock cost − strike) + premium, floored at the put strike. Breakeven: stock cost + premium.
Vertical spreads
Two options of the same class on the same underlying, different strikes, same expiration. Whether the position is a net debit or a net credit determines the formulas.
Bull call spread (net debit)
Long lower-strike call, short higher-strike call. Max gain: spread width − net debit. Max loss: net debit. Breakeven: lower strike + net debit.
Bear call spread (net credit)
Short lower-strike call, long higher-strike call. Max gain: net credit. Max loss: spread width − net credit. Breakeven: lower strike + net credit.
Bull put spread (net credit)
Short higher-strike put, long lower-strike put. Max gain: net credit. Max loss: spread width − net credit. Breakeven: higher strike − net credit.
Bear put spread (net debit)
Long higher-strike put, short lower-strike put. Max gain: spread width − net debit. Max loss: net debit. Breakeven: higher strike − net debit.
Straddles and combinations
Long volatility or short volatility trades. Same underlying, same expiration, one call and one put.
Long straddle
Long call + long put, same strike. Max gain: unlimited on the upside, strike − total premium on the downside (stock to zero). Max loss: total premium paid. Breakevens: strike ± total premium.
Short straddle
Short call + short put, same strike. Max gain: total premium received. Max loss: unlimited on the upside, strike − total premium on the downside. Breakevens: strike ± total premium.
Long combination / long strangle
Long out-of-the-money call + long out-of-the-money put, different strikes. Max loss: total premium. Breakevens: call strike + total premium on the upside, put strike − total premium on the downside.
How to work an options question under exam time
The fastest candidates don't solve options questions — they apply a four-step template to every prompt.
- Name the position. Single call? Single put? Spread? Straddle? Hedge? Name it before you touch a number. Misnaming the position is the single most common options mistake.
- Set net debit or net credit. For any multi-leg position, sum the premiums with signs. This number is the max gain (for credit spreads and short volatility) or the max loss (for debit spreads and long volatility).
- Apply the formula. Max gain, max loss, and breakeven fall out of the template once the position is named and the net debit/credit is set. No need to redraw the payoff diagram for every question.
- Sanity-check against the payoff. Does a long call really have unlimited upside? Does a short put really lose down to zero? A ten-second check catches nearly every calculation error.
The traps the exam loves
Options distractors cluster around a small number of predictable mistakes. Name them so they don't cost you points.
Premium direction
A long position pays premium; a short position collects it. Reversing the sign collapses every downstream number.
Strike versus stock cost
Covered-call breakeven uses stock cost minus premium — not the strike. Protective-put breakeven uses stock cost plus premium. The strike governs where the hedge kicks in, not where you break even.
Unlimited versus finite loss
Naked calls and short straddles carry unlimited loss on the call leg. A spread caps loss at spread width minus the credit. The suitability consequences differ and the exam tests that.
Expiration, not exercise
Most exam questions assume the position is held to expiration. Early assignment and exercise questions are their own category — read the prompt before applying an expiration formula.
Per-share versus per-contract
Equity options cover 100 shares. A $2 premium is $200 of cash flow per contract. Forget the 100 multiplier and every dollar answer is off by two orders of magnitude.
How PassSeries7 drills options math
PassSeries7 ships the options chapter inside the 436-page handbook across 20 chapters, with worked formulas and payoff diagrams for every strategy above. Section-tagged flashcards from the 385-card deck push max gain, max loss, and breakeven into spaced-recall rotation so the templates stay automatic. The 1,000-question mapped practice bank includes options-only sets with worked explanations for every distractor — so you learn which trap each wrong answer is testing, not just which letter was right. The 125-question full-length exam simulation threads options throughout a 3h45m block, exactly as FINRA does, so fatigue on options math surfaces before exam day.
Candidate questions
Frequently asked
Do I need to memorize every Series 7 options formula?
Yes — and no. You have to memorize the single-option formulas (calls and puts, long and short), because every spread and hedge is a combination of those four. Once the single-option formulas are automatic, spreads and straddles fall out of the net debit / net credit templates without raw memorization.
How heavy is options on the Series 7?
Options is widely treated as the highest-friction, highest-yield block on the Series 7 — a chapter that punishes rushed study and rewards candidates who drill the math daily. FINRA does not publish a topic-level question count for options, and no study product should claim one. Plan to spend meaningful time there regardless.
What's the fastest way to set up max gain, max loss, and breakeven?
Name the position, sum the premiums with signs to get the net debit or net credit, then apply the formula for that position type. A payoff diagram is a sanity check, not the solution — the formula table is faster and less error-prone under exam time.
Are options formulas the same for index options?
The max gain, max loss, and breakeven formulas are structurally the same. The differences the exam tests are settlement (cash-settled vs. physical delivery), contract multipliers, and which products are American versus European exercise style. Those belong to the chapter content, not to the formulas themselves.
Do I need to draw a payoff diagram on every question?
No. Diagrams are useful when you're learning a new strategy, but under exam time the four-step template — name, net debit/credit, formula, sanity check — is faster. Save the diagram for positions you haven't fully internalized yet.
Next study steps
Related Series 7 resources
- Free Series 7 practice test
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- Series 7 practice questions
1,000 mapped questions with worked explanations, plus an endless-practice mode.
- Series 7 flashcards
How spaced-recall flashcards work for the Series 7 and how the 385-card deck is built.
- Series 7 study plan
A concrete 12-week plan with weekly cadence and readiness checkpoints.
- Series 7 exam readiness
How a 125-question full-length simulation and section mastery combine into a directional readiness signal.
Turn the article into reps
Drill options math in the product
The options chapter, section-tagged flashcards, mapped practice, and the 125-question simulation all ship in both plans — $90/month or $420 lifetime.
PassSeries7 is an independent study product and is not affiliated with FINRA or any official exam body. The 2026 FINRA Series 7 outline is published at finra.org/series7.
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